CSX, Norfolk Southern disappointing UPS

Delays force shipper to rely more on trucks

RICHMOND, Va. (AP) -- Rail giants CSX Corp. and Norfolk Southern Corp. are losing half their buisness from one of their largest customers -- United Parcel Service -- because of delays and problems since the railroads carved up Conrail's Northeast routes.

UPS, the nations largest parcel service, has diverted about 50 percent of the traffic normally handled by the railroads to trucks, spokesman Norman Black said Wednesday.

"For efficiancy, for economical reasons, for enviromental reasons, we much prefer to rely on our rail partners," Black said. "But the first thing we have to worry about is deliviring these pagackages the day we say we're going to deliver them. If the railroads can't step up to that we have no choice."

Richmond-based CSX and Norfolk-based Norfolk Southern have struggled to intergrate the systems of Conrail since taking them over June 1. Both companies' earnins have been down because of costs associated with the $10.2 billion acquisition.

"There are signs here of deterioration," said Michael Lloyd, a railroad industry analyst at Merrill Lynch in New York. "It's not dramatic. But week by week it's not getting better, it's getting slightly worse. And this is of course before the peak shipping season in October.

"They better show some noticeable improvement one of these weeks, "Lloyd said.

Black said UPS's service problems began immediately.

UPS had shifted about half of its buisness to trucks late last month, but saw improvment by the railroads in early August and reduced that figure to 20 percent.

But the delays returned last week and UPS is now back up to 50 percent diversion.

"It just went totally downhill again," Black said. "Every train started running late and again and the maximum delays started to grow again, forcing us to respond as of this past Monday by resuming the diversion of more of our volume."

UPS ships 9.5 million packages a day on surface transportation and spent more that $500 million on all shipments in 1998. The company did not release how much of that figure goes to CSX and Norfolk Southern, but Susan Terpay, a spokeswoman for Norfolk Southern, said UPS is on of the company's five largest customers.

Officials at CSX and Norfolk Southern insisted the problems are being addressed.

CSX spokesman Dan Murphy blamed recent problems on a variety of factors, including maintenence work scheduled for the slower summer months. He said the company intends to add 105 locomotives, 44 designed for intermodal transportation.